Canadians continue to reel from the impact of higher prices for necessities, StatCan says
The Canadian inflation rate stood at an annualized pace of 3.1% in November, essentially flat with the 3.1% rate in October, according to the national statistics agency.
Statistics Canada attributed the steady consumer price index reading to higher prices for travel being offset by slower price growth on food along with lower prices for cellular services and fuel oil.
Excluding food and energy from the equation, the CPI was at 3.5% in November, slightly higher than the 3.4% gain seen in October.
“Canadians continued to feel the impact of higher prices for mortgage interest costs (+29.8%), food purchased from stores (+4.7%) and rent (+7.4%), which were the largest contributors to the year-over-year increase in November,” StatCan reported.
The Bank of Canada is considering a potential interest rate cut in 2024, but Governor Tiff Macklem emphasized the need for sustained downward momentum in core inflation for several months before making a decision.https://t.co/HdKTYqFyOc#mortgagenews #ratehike #interestrates
— Canadian Mortgage Professional Magazine (@CMPmagazine) December 19, 2023
Analysts noted that these results give the Bank of Canada a compelling reason to maintain its “hawkish” tone and keep the benchmark policy rate at its current 22-year-high of 5%.
TD chief economist Beata Caranci said that the November readings support central bank governor Tiff Macklem’s cautious approach towards “the stickiness of inflation.”
“It also helps reinforce why we didn’t get the same tone out of the Bank of Canada that we’re getting out of the US Federal Reserve, who is showing more comfort around the direction of their inflation numbers,” Caranci told BNN Bloomberg.
Craig Alexander, president of Alexander Economic Views, said that the latest results are “a bit of a disappointment” that could keep the BoC on the sidelines for the foreseeable future.
“What we’re really debating about is when will central banks cut rates,” Alexander said. “I think that the Bank of Canada will want to see real definitive evidence that core inflation is heading down to the 2% mark before they actually start to really provide any real interest rate relief.
“If we remove the impact of shelter costs, specifically mortgage rates, the rate of inflation is only 2.2%. Will the Bank of Canada see through its own impact on inflation? Because those higher mortgage costs are coming from the prior Bank of Canada rate hikes.”
